Question

How has the U.S. economy been doing in recent years? Why do you think that is? Gather relevant economic statistics, such as the growth rate of real GDP, the unemployment rate, and the inflation rate, to support your case.

Answer 1

The economy is calculated by domestic gross product. That's the dollar value of all the last year's growth. GDP growth is the most important indicator which compares this quarter to the last. When the economy is stable, GDP growth will range from 2% to 3%. If the economy expands by more than 3%, it could overheat. It's in danger of contraction when it's below 2 percent. If it is below zero it will be in a recession.

June's unemployment rate was a record 11.1%. It was 14.7 per cent in April. As of the Great Depression, both are higher than at any point. Unemployment is an sign of lagging behind. Companies typically wait until a recession is well under way before the employees are laid off. Reducing the unemployment rate still takes some time, even after hundreds of thousands of new jobs have been developed.

The stock market tells you what the economy will think of the investors. It also reflects profitability and corporate profits. Organizations can exploit earnings to boost their looks. In the long term, however, stock prices reflect demand and economic health. Dow Jones Industrial Average, S&P 500 and NASDAQ are the three most common US stock market indexes. The stock market often trades sideways. That could mean a long string of gains is digested. This is not worrying

Companies must borrow more to grow their operations, buy equipment and recruit more employees. If interest rates increase the reverse happens. But interest rates may be too low for that. It creates a liquidity trap, if that happens. The interest rates are too low for banks to take advantage of their lending. Rising interest rates are the antidote. Then, people now take out loans to stop potential higher rates. The fed funds rate is the most important rate, because it guides most other interest rates. The current targeted range of fed funds is between 0.0 and 0.25 percent.

That level of inflation is good, since consumers expect higher prices then. That makes them more likely to buy now, instead of waiting. The increased demand spurs economic growth. The Fed makes use of the rate of inflation when deciding whether to raise the rate of fed funds.